Right. This log is normal, except for the last line. For some reason the EABI compiled stock kernel only can be reloaded on a warm boot. For that reason the reload script uses flag file. It sets the flag, reboots, and reloads on the 2nd call. That is what you are seeing here.

Your reloaded kernel doesn't give any output to console. That can have several reasons. First one is no serial driver. In the kernel config you should enable the serial driver (Device drivers->Character devices->Serial port) and also set the flag 'console on serial port'. Further you can set the 'early printk' flag in 'Kernel hacking'. This will enable console output before the serial port is initialized. Don't ask how.
The 2nd possibility is a bug in reloaded.ko. It should bring the cpu in a predefined state, from which the kernel can boot. When it fails to do so, the kernel might fail. Lately I have read about problems in older u-boot versions, which cannot boot a recent kernel on Kirkwood boards, because it doesn't disable some cacheline before invoking the kernel. Older kernels could handle that, but newer ones don't. This could be something similar.

# Character devices
#
CONFIG_VT=y
CONFIG_CONSOLE_TRANSLATIONS=y
CONFIG_VT_CONSOLE=y
CONFIG_HW_CONSOLE=y
# CONFIG_VT_HW_CONSOLE_BINDING is not set
CONFIG_DEVKMEM=y
# CONFIG_SERIAL_NONSTANDARD is not set
# CONFIG_NOZOMI is not set
#
# Serial drivers
#
CONFIG_SERIAL_8250=y
CONFIG_SERIAL_8250_CONSOLE=y
CONFIG_SERIAL_8250_PCI=y
CONFIG_SERIAL_8250_NR_UARTS=4
CONFIG_SERIAL_8250_RUNTIME_UARTS=4
# CONFIG_SERIAL_8250_EXTENDED is not set
#
# Non-8250 serial port support
#
CONFIG_SERIAL_CORE=y
CONFIG_SERIAL_CORE_CONSOLE=y
# CONFIG_SERIAL_JSM is not set
CONFIG_UNIX98_PTYS=y
# CONFIG_DEVPTS_MULTIPLE_INSTANCES is not set
CONFIG_LEGACY_PTYS=y
CONFIG_LEGACY_PTY_COUNT=16
# CONFIG_IPMI_HANDLER is not set
CONFIG_HW_RANDOM=y
# CONFIG_HW_RANDOM_TIMERIOMEM is not set
# CONFIG_R3964 is not set
# CONFIG_APPLICOM is not set
# CONFIG_RAW_DRIVER is not set
# CONFIG_TCG_TPM is not set
CONFIG_DEVPORT=y
CONFIG_I2C=y
CONFIG_I2C_BOARDINFO=y
CONFIG_I2C_COMPAT=y
CONFIG_I2C_CHARDEV=y
CONFIG_I2C_HELPER_AUTO=y

qind of a question...
i would like to have the config file that you used to compile 2.6.18.6-cs kernel (if you have it), if not i'll improvize
on the current nsa220 lenny distribution there is no /proc/config.gz ...maybe i'll find it on zyxel enviroment now that i have the console

hello, Mijzelf
i have a quick question about../boot/initrd
i have to make a new initrd for the new kernel 2.6.26 or use the one that you made (that already exists)?
if i have to make a new initrd...how i do that?